Faith in the System

There are still many problems to be solved before RFID technology can dramatically improve efficiency throughout the global supply chain. But our democratic capitalist system means they will be resolved quickly.

Jun 21, 2004— Before RFID technology can deliver on its promise to dramatically improve efficiency across the supply chain, many issues need to be addressed. Tag costs need to come down dramatically. New software needs to be developed

to take advantage of RFID data. Standards need to be agreed upon. These issues are so significant that that some CEOs wonder if RFID will ever live up to its promise. It will, and here's why.

As long as there is a need for something, capitalism will reward those companies that overcome problems, deliver value and fulfill the need. There was a market for low-cost RFID tags and all the associated infrastructure needed to take advantage of those tags, and big companies, including Gillette, Metro, Procter & Gamble, Tesco and Wal-Mart, backed the Auto-ID Center to create such technology.

Once Wal-Mart announced that it would require RFID tags carrying Electronic Product Codes to be put on pallets and cases beginning January 2005, the demand for low-cost tags and related technologies became obvious and the capitalist system responded. Big and small companies moved into the market to provide the hardware, software and services needed to begin taking advantage of the technology.

Some CEOs are not looking at how much progress has been made over the past year; they're looking at how much progress still needs to be made. But there is good reason to believe that the remaining obstacles will be overcome. The pace of innovation in the RFID industry is speeding up. Each week, RFID Journal reports on new companies bringing new expertise to the market to solve problems and get a piece of this new market.

Earlier this month, we ran an article about QinetiQ, a science and technology company based in Farnborough, England, that has teamed with a United Kingdom-based subsidiary of Sun Chemical to create inks that can be used to create low-cost RFID antennas (see 'Growing' Low-Cost RFID Antennas). QinetiQ's technique reduces the number of steps it takes to create an antenna and attach it to an RFID microchip and holds the potential to dramatically reduce the cost of finished transponders.

This week, we will run a story about Truth Software, a company started by Raymond Blanchard and Jie Weng, formerly of SAP, and Hau Lee, a distinguished professor at Stanford, who is the co-director of the Stanford Global Supply Chain Management Forum. The company has just unveiled an alpha version of its first product, True Demand, a replenishment application that attempts to use RFID data about case movements to reduce out-of-stocks. It's one of the first software applications designed to use information from RFID tags in the supply chain to reduce out-of-stocks and improve inventory turns.

True Demand is designed to help manufacturers get a return on their investment in RFID technology that goes beyond just incremental improvements due to improved inventory accuracy or savings from not having to scan bar codes. It was developed specifically to address the challenge of how to improve forecasting and replenishment with existing data, as well as the emerging RFID data, while reducing inventory and out of stocks. Only time will tell if the software helps manufacturers to achieve a return on their investment in RFID systems, but the fact that Truth Software has jumped into the market shows that capital—both intellectual and financial—is being drawn into the RFID market to address the issues that are keeping CEOs at leading manufacturing companies up at night.

Given the immature state of RFID technology today, CEOs have two choices. They can sit back and wait and see whether the technology evolves to the point where it delivers the promised benefits. Or they can have faith that the capitalist system will draw talent, expertise and financial resources to solve problems and innovate in ways that enable RFID to live up to expectations. Given the enormous progress that I've seen over the past two years, the right course seems obvious.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below.